Vancouver Sun; Rennie; Sommerville – “No Bubble” – “You only need a household income of $53K to buy a condo. That’s not a bubble story.”; “We’re expensive. That’s the reality of what we are.”

“Bubble? What bubble?
That’s Vancouver condo marketing guru Bob Rennie’s take on concerns that the region’s real estate market is headed for a meltdown because of sky-high prices.
“It’s not a bubble,” said Rennie, director of Rennie Marketing Systems, in an interview following his keynote address to the Urban Development Institute Thursday.
“With the 80 per cent of the [condo] market that traded in [Metro] Vancouver last year, you only needed a household income of $52,800 to purchase. That’s not a bubble story.”
Rennie, who spoke to a full house about the state of the Vancouver property market, said aging baby boomers with billions of dollars in equity will become a much greater force in the condo market as they increasingly downsize from expensive single-detached homes, and put money aside for their children.
He also noted that the number of people between 55 and 64 will increase 38 per cent between 2009 and 2018, those between 65 and 74 will increase 56 per cent, while those between 35 and 54 will only increase by 4.6 per cent.
Because of that, he said, developers should shift their thinking into providing more larger one-bedroom condos to accommodate the downsizing boomers.
“I believe the leaner, meaner baby boomer is the game changer,” said Rennie. “Baby boomers are sitting on $88 billion in equity in Greater Vancouver and they’re looking at their retirement years. That equity will be freed up over the next 15 years [and] when they sell their home, they’ll buy down and help their kids.”
Rennie said there were about 19,000 condo sales in Metro Vancouver in 2011, and that while the average price for 80 per cent of those condos was $315,000, the overall average price was $427,000, which required an income of $66,000 to finance.”
…“Meanwhile, Tsur Somerville, director, centre for urban economics and real estate, Sauder School of Business at the University of B.C., said he also doesn’t believe there’s a real estate bubble in Metro Vancouver, largely because there’s not an explosion in housing starts – typical for real estate bubbles.
Somerville said that while the affordability numbers have been skewed by the higher end parts of the market – “there were double-digit increases in Richmond, Vancouver, Burnaby and West Vancouver, with single-digit increases everywhere else” — the region is still very expensive compared to other cities in Canada.
“Compared to other cities, that income [$52,800] gets you a house. Here, it gets you a condo. That means we’re expensive, but that’s the reality of what we are.
“It’s still an expensive place to live, but it’s not unaffordable. You’ll end up smaller and further away from the core.”
…
– from ‘Condo king says talk of bubble just a lot of hot air’, Vancouver Sun, 17 May 2012
[hat-tip Makaya]
—

Rennie’s conclusion that “it’s not a bubble” does not logically follow from “you only need a $52.8K income to buy a condo”. To assess whether we are in a speculative mania, you need to analyze how the fundamental value of that property compares with the price you are paying. In Vancouver rental yields are at extreme historical lows.
Also, note that Rennie is focussed on the condo market, and he is expecting that large numbers of locals will downsize from SFHs and buy condos. But remember, downsizing means you’re partly getting out of the market, and that you are a net seller; who does he imagine is going to be doing all the net buying? Without ready buyers, that paper $88 Billion in RE equity can become $66 Billion then $55 Billion fairly rapidly, as prices plunge. Eventually we suspect it’ll represent less than $44 Billion in paper value.
Somerville, too, chooses not to talk of prices compared to measures of fundamental value, and instead makes the well known “expect to accept less for more” argument, one that can be used to argue for any price level imaginable.
– vreaa

68 responses to “Vancouver Sun; Rennie; Sommerville – “No Bubble” – “You only need a household income of $53K to buy a condo. That’s not a bubble story.”; “We’re expensive. That’s the reality of what we are.””

Rennie is basically stating that if you earn $50K or whatever you can afford something, it just won’t be close to the core. I think Rennie is a dangerous person but he’s right. If you earn $50K and need to buy at today’s prices there are options. But never mentioned, if you don’t need to buy (and nobody ever does) there are oodles more options closer in. Just saying!

If you learn one thing reading this blog today it is this: in healthy market situations it’s cheaper to buy than rent because an owner must make money. In today’s property market in Vancouver that has been turned on its head. This means you are almost certainly overpaying by buying today regardless if it’s in Vancouver proper or Maple Ridge.

I think Rennie’s comment is disingenuous but if one believes that high prices are here to stay then “reviewing one’s options” is the only alternative, and that involves moving down market. It completely ignores the business case of current prices versus their earnings. And I think bubbly we agree ignoring the underlying business case will be, like all other bubbles, the inevitable and predictable cause of death.

The thing that still flabergasts me is the inverse relationship between price and borrowing costs. It seems that prices in Vancouver are (for the past decade at least) almost entirely determined by whatever people are able to pay on a monthly basis.

Housing prices tripled as the BoC rate fell by a factor 3. Who’s to say that housing prices won’t fall by a factor of 3 if/when the BoC rate triples again?

Precisely… And, actually, the inverse effect will be worse than a simple reversal, because people will stop ‘reaching’ for max affordable in the face of falling prices.
Once the process turns, we’ll have a big pocket of fresh air under the market….

Vancouver real estate isn’t the only asset that has this occur. Notice how relatively decoupled US RE markets are from interest rates. When a market is heavily leveraged, liquidity is robust, and equity growth is positive, it shouldn’t be surprising. When one of those fails to occur, it’s ruh-roh.

As it happens, the price-based ratios are vastly more important than the payment-based ones in determining whether homes are fairly valued for the long haul. This is because the impact of rates is, unlike those of incomes and rents, ephemeral and undependable. But while the price ratios are more important in determining the state of the market as a whole, the payment ratios may be more important to those considering a long-term, debt-financed home purchase.

Interestingly in Canada the Bank of Canada and the government have decided to throw a wet blanket on the market before things get worse. I don’t think it’s fully understood how drastically credit could be curtailed before rates rise (and it could very well be several years before they do), because the alternative — prices and debt ratios increasing as negative real rates persist — is decidedly worse and corresponding with advents of future 5 year mandates. As much criticism Mark Carney gets, I do think he fully understands the major risk confronting Canada and he has significant influence in the government. We’ll have to see if the government plays ball but by all measures visible to an outsider such as myself, they are going to right the debt/housing-bubble ship before the weather turns it over.

I have been a Realtor LONGER then RENNIE. I have worked in 4 different cities across CANADA and MEXICO. I “played” in MIAMI and LA for years and listened to the Realtors speak EXACTLY the same words as RENNIE.. I mean down to the exact words! They are ALL BANKRUPT. I have watched bubbles form and crash literally overnight… We are in a bubble, the world economies are going to crash.. along with CURRENCIES.
Anyone who buys a condo or home at this time will regret it for the rest of their lives. I have a graph of ALL companies, currencies, real estate in cities worldwide and commodities showing the top and bottom. Its is quite spectacular!

If there is a big drop leaving the worker class in debt, a fair protest would be to take them on a cruise to the Fukishima plastic island floating this way and let them subdivide that. Heck, save the gas and sink the boat in English Bay. If you incarcerate nefarious speculators like they do in Asia and Persia, builders and homeowners would have a harmonious relationship of equitable supply and demand. Realtors and media directors have duped themselves into believing they add value to housing and journalism when they are merely wallet leeches. They don’t realize they are building their own gallows. Where will they run to? Vancouver has such limited available space. 😉

add … i expect tptb to try and screw me at every turn and am pleasantly surprised when they don’t and/or when they manage to get anything useful done at all … i look elsewhere for optimism about humans

All it is is them frantically blowing what remaining air they have into the balloon.

I saw this in California as well as things started going down.

Realtors (et al.) say that stuff and the average Joe who is invested eats it up as comfort food. It just keeps on going that way until the rot begins to show through to such an extent that no one can ignore it anymore.

It’s almost at that stage now, judging from most of the stuff in the non-Global MSM.

In my experience, very few boomers actually want to downsize to a condo from a SFH. There are plenty of seniors in my hood who live in large SFHs and wouldn’t think of condo living. They enjoy things like gardening, and not having to worry about the bloody strata rules. I think far fewer will downsize to condos than he thinks. My own grandparents lived well into their 90s in SFHs (with a little help from neighbours and family to help with yard maintenance.) A condo (apartment) is for people who can’t afford houses-though I know they’re always marketing it as a “lifestyle” option, we all know the truth. Everyone wants a house and usually once they have it, there’s no going back.

Generally true.
What may be “different this time” is that a large number of boomers heading into retirement have their entire net-worth in the value of their SFH. Sure, some will HELOC and reverse mortgage to fund their retirements, but we suspect that more than a typical number will be selling and then either downsizing, renting, or leaving town.

If they already used up a good part of the home equity (consumption, renos, downpayment for kids) they may soon need to access to that last bit of inaccessible through a HELOC, especially if they see it evaporating due to falling prices and/or the HELOC interest payments become a bigger and bigger part of monthly expenses.

“The implications are clear: If you are counting on current home equity to at least partially fund your retirement and are hanging on for that last bit of capital gain before selling, you are playing a dangerous game.”

I think it varies based on income and background. I’ve seen it all over the map, some moving soon after children leaving home, others moving to different cities or locations, and still others staying put until they’re dragged away vertical or horizontal.

We’re trying to eyeball the mean behaviour from a wide distribution and this is prone to significant skew. Best to look at previous age cohorts for guidance how quickly or slowly they change houses. Personally I’d take two scenarios on either side of what we think the average is, test it, and see the range of impacts to to existing housing mix. My initial guess is that the construction industry will adapt to build what people want instead of what people think other people want.

Hahaha. That’s all that needs to be said really. I see it this way: nothing about the real estate market in Vancouver is true until it has been officially denied by a member of the developer/realtor machine.

I had complained to Global TV about that condo-ad scam a few weeks ago.

Now I’m considering writing to people at the Sun. Perhaps columnist David Baines, who does good exposes on business practices for them, would like to investigate conflict-of-interest issues at the Sun. Perhaps the Sun would like to phone Ben Rabidoux or Robert Shiller the next time they’re doing a story on Vancouver RE. Or other experts around the world who have called the Vancouver situation a bubble for months if not years.

And I’m also considering writing to UBC — the President and the Board of Governors — over whether they don’t perceive the possibility of a stark conflict of interest with respect to Professor Sommerville’s views on the housing market, given the funders of his centre.

If the public is being deprived of facts or deceived because of conflicts of interest in the media or at the province’s largest institution of higher learning, obviously this is a very serious issue that needs to be addressed.

I agree with your position, epte/Vesta.
It’d be very fair to lodge complaints as you describe.
David Baines may respond.
We suspect that UBC will simply argue that it’s very productive for universities to have relationships with industry.
Keep us informed of your progress, please.

I was actually trying to think even before I saw Renter’s Revenge’s comment below (right on, RR!) how I could spread the word about this website, the VREAA, which posts so many useful facts. Perhaps I will wander the streets in a sandwich board, but I was also definitely going to mention it to both David Baines and anyone I write at UBC.

“And I’m also considering writing to UBC — the President and the Board of Governors — over whether they don’t perceive the possibility of a stark conflict of interest with respect to Professor Sommerville’s views on the housing market, given the funders of his centre.”

Even professors within Sauder have no illusions about its true nature. We might wish it were better, but it is what it is. Where is the incentive to change it?

Anonymous Professor, I hear what you’re saying, but speaking just from my own observation, universities that take seriously their role in the public sphere don’t want to be embarrassed. I know many at UBC are genuinely proud of the good things UBC does for/with the community, and many might be genuinely disturbed to hear more about such a potentially damaging (to the community and UBC) conflict of interest related to Sauder.

When I got angry last spring about what I believed was UBC’s selling campus housing off too blithely to investors, I called the President’s office and also members of the Board of Governors, as I’m sure others at UBC and elsewhere did too. I’m not suggesting my own calls made any difference, but I was glad to see that a Board of Governors task force on housing was established in 2011. Many faculty and staff members commented on housing problems at UBC at a comments site that was set up by this task force. And it was wonderful to see, just weeks ago, that at a stage in planning when more comments were invited, *a number of UBC deans wrote in to say very forcefully that many things about campus housing might need to be changed, including the selling of units to investors when so many faculty and staff needed housing.* When deans start speaking up, perhaps things will change. So I think we must all keep trying.

“We might wish it were better, but it is what it is. Where is the incentive to change it?”

How about reputation, which is the school’s most valuable asset?
I’m so mad at what you’re saying. It suggests that all the “ethics” classes, conferences with Joel Bakan of the Sauder are just BS served to student to give the school good image that it builds future responsible leaders and good citizens.

What does James Tansey think about it? I’m sure he’d be very happy to know that everything he’s teaching/preaching is just fluff that even the school doesn’t care about. Puke!

The incentive to change it is when the media starts asking tougher questions and making the usual suspects stumble. The media perpetuate industry group credibility by not presenting bearish analysis in their reports. That they can’t find anyone means they aren’t doing their job, not least the editing of stories for short sound clips can take quotes out of context. The media has attempted to contact anonymous bloggers before. Here is what my response has been, taking verbatim from Tanta:http://www.calculatedriskblog.com/2007/03/media-inquries-policy.html

Dear reporters, we quote your stuff periodically, giving credit both to the reporter and the publication, under fair use terms. We have no objection to your returning the favor. If you have an editor who will not allow that, and you think that the problem can be solved by getting one of us to drop our online personas, give you our real names, and say the same thing to you over the phone, so that you can get your editor to accept it as something other than just blogging, which everybody knows is untrustworthy ranting by anonymous nuts, you are making a faulty assumption about the relationship among us, our birthdays, and yesterday. Neither CR nor Tanta wishes to play into a set of assumptions that render what we say on the blog as unworthy of coverage by the Big Media, but what we might say on the phone to Intrepid Reporter as good dirt and straight skinny.

Screw the MSM for thinking a vetted face is a necessary component of the idea.

jesse -> Right on.
Some time back vreaa was invited, via e-mail, to appear in an interview on local television – when we revealed we preferred to remain anonymous, we received a rather blunt dissing. We were told that, given the anonymity, our opinion had absolutely no value.
It is remarkable that the media is unable to examine the content of that which is said, rather than choosing to be in awe of the source.
We all know that the weakest argument is that which comes ‘from authority’ (“Believe me because of who I am, not because of what I say.”).
History is peppered with times when the group would have been wise to take into account the anonymous voices.
With the web and all, we suspect this practice will get more respect with time – but that is not yet the case.
…
BTW, we agree with the commenter on VCI today who remarked that you (jesse) would make an excellent public bear analyst. But we obviously also respect your decision not to play that role.
…
Perhaps we need a ‘persona’ like the group ‘Anonymous’ (not to associate ourselves with anything illegal, of course, that simply isn’t necessary. Simply to give ‘body’ to the thoughts.).
A bearish Vanc RE analyst, on video, wearing a bear mask?
Still anonymous, but at least a provably living being.
“On the internet, nobody knows you’re a bear.”
…
On fourth thoughts, however “Screw the MSM for thinking a vetted face is a necessary component of the idea.”
The IDEAS are what is important, and we’d expect the MSM to step up and process and analyze the ideas.
If they don’t let’s keep holding them to that.
On this note, where is Gord?

I have little direct contact with Sauder so I don’t know too much about its internal goings-on. All I can say is that the last (senior) Sauder prof with whom I spoke viewed the school as being quite overrun by corporate interests. Now that’s just one guy, venting his spleen over beers, so perhaps it should be taken with a grain of salt.

Hi Makaya,

As mentioned above, I have few direct connections with Sauder and I don’t know the people of whom you spoke. I’m sure there are some great people within Sauder. It is a shame they aren’t in the Global TV rolodex.

What about establishing connections with one or two journalists, who are willing to maintain your anonymity, but allow them to verify that you’re a real person and some facts about your life (education, type of job, etc.) and your motivation/intentions for running this site.

Academia may be about Ideas, but the media is about Stories. Perhaps if you had some scandalous insider information, that would be enough for a story, but everything on here is usually public information, just analyzed/filtered through a non-mainstream (but coherent and intelligent) point of view.

Another side of Ideas is a certain obligation to stand up for them in whatever fora they are challenged or oppressed, including the public debate/media.

Granted, these two individuals may simply be playing their roles, and they may be doing that sincerely.
A more important issue is why the media only turns to ‘incumbents’ when they need comment on the RE markets.

@MM, blogs have always been about free thought and near uncensored debate; It’s not pretty and concise, and full of noise for those new to the format, but anonymity allows ideas to flow more freely without encumbrance of conflict of interest.

I’ve had people ask me online what I do and my personal situation. I have disclosed a bit on mohican’s blog and various things here and there, but ultimately it’s a sidebar to the discussion at hand, as long as I argue in good faith, it is no more than a lawyer would advocate for the interests of a client, in my case it’s Vancouver’s long-term economic viability. I have no code of ethics binding me but my sense of patriotism, and those are only words; I’ll let the hundreds of thousands of words I’ve written over the past 5 years on local blogs stand on their own merit. In fact an intrepid reporter can dig up a few comments if they want something to throw up on the screen. Maybe they can hire an animator to give me a moving avatar or some such thing, though I’d prefer one of the dudes from the Dire Straits Money for Nothing video.

Beyond that, there is something that I feel would be lost by having a “face”, mostly it separates my comments from others and that would be a bad thing; I don’t think my comments have any more credence than other posters here or on other associated blogs, many who have shown themselves to be intelligent and astute and may have their own reasons for remaining anonymous.

Again, the MSM can use any information or discussion here, free of charge (I think…?), with proper citation, and we will endeavor to do the same with their valuable content. If reporters want to tap some f-ing good (and bearish!) analysis by local commenters and posters they can jack themselves in, give themselves a name, and have a convo in full view like we all do here. Full Monty, on the record, no edits, in all its horrible and austere glory.

Agree with your entire comment, jesse.
…
In particular: “there is something that I feel would be lost by having a “face”, mostly it separates my comments from others and that would be a bad thing”.
In certain ways your involvement in the debate would become more about ‘you’, and far less about the RE market’s effect on the community. Of course, you would be a single very valid anecdote, but, henceforth, every analysis you offered would be interpreted in terms of your position, and important general points would be lost. I agree strongly it would detract from the broad subject at hand.
…
And your point is a good one regarding the MSM having the choice to interface productively with bearish analysis at blogs like VCI, or Housing Analysis, or The Economic Analyst, or here at VREAA. The MSM seem to know that blogs host and produce much fertile debate, but their involvement thus far appears to be limited to allowing some debate in comment sections, and some rather tentative sanitized blogs of their own (that never appear to take off, for some reason; they always seem to be more concerned about somebody offending; they usually want registration, etc.).
We could imagine a reporter who has a public persona making themselves know on the blogs, exchanging and collecting ideas from the blogs, and then writing a weekly ‘From the blogs’ column for The Sun, or whoever. It’d also be a great forum for the discussion of the future of information dissemination and journalism.
…
Also, what about schools of journalism in this town? We’ve said it before, but aren’t there intrepid young wannabe reporters who would like to take this on either in form or in content?

Global TV Promotes RE, Yet Again – “Realtors like it because they want to get their realtors.. their clients, sorry… the best deal they can.”
VREAA 2.Apr.2012http://wp.me/pcq1o-3Uv

“In the Global clip, Ms Fluet is portrayed as a ‘White Rock Investor’, yet in an article in ‘The Province’ [‘Two homes are better than one’, 17 Oct 2010], it is revealed that she is a ‘sales representative’ selling condos for Cam Good’s ‘The Key’ marketing group, the same people behind this promotion.
Global TV continues to promote RE in the guise of ‘News’, and is disingenuous in the way it presents information to its viewers.”

Maybe just try a different paper for a change of pace, Vesta. I see that the Globe and Mail took 8 National Newspaper Awards this year while also garnering 24 nominations. No awards for the Vancoubver Sun…..sorry. They are too busy pumping sunshine to seek out better qualified sources.

For more of Rennie, see this week’s *Georgia Straight*. Its segment on “Urban Living” has a story about a trend toward women buying condos on their own. (Very upbeat headline and subhead.) Halfway through the column, there’s a quote from Rennie, preceded by: “At Marine Gateway, a development on Marine Drive at south Cambie Street that sold out on opening day and offered more than 200 units under $270,000, 50 percent of buyers were female — a big jump from past projects.” This smells of a kind of pay to play: if you want to quote the Condo King, you have to plug his latest project. (Without asking uncomfortable questions like “If it sold out weeks ago, why did I see an ad for Marine Gateway on the back of a bus yesterday?” or “If 62 percent of the buyers for Marine Gateway identified themselves as investors, as you stated in an interview with other media this week, how can we know what proportion of the residents will be women?” or “Who wants to live next to the dump anyway?”)
The article mentions the opinion of one pro-renting bear — the mother of the young woman featured in the story. Hard for her to compete with Rennie for media authority. Not mentioned is that the young woman works for Vancouver Coast and Mountains, which appears to be a successor to or part of Tourism BC — so she’s with the program. Though is it revealing that this self-proclaimed devotee of all Vancouver has to offer is considering moving from her West End rental to a condo in . . . Surrey?

I wonder if the poor schmucks who buy based on the advice and commentary of RE ‘experts’ will have cause for a class action suit against them if prices fall. I would LOVE to see the usual suspects (Rennie, Tsur, McLister etc.) hauled up in court and hit in the pocket book for their glib, ill-advised opining.

To be clear, I don’t mind if they have a different point of view from me but they need to back it up with something more than excessive self-belief. Or should that be ‘excessive self-interest’.

Why should they be able to sue? Nobody was holding a gun to their heads. If you buy and then are unhappy because of falling prices, you have only yourself to blame. Or you can blame it all on others and “occupy”.

With regards to question about how the boomers will find buyers for their homes, simply, their own kids!

let’s say Boomers A sells his house to kids of Boomers B. Boomers B give their kids a HELOC loan for downpayment and the kids finance the rest. Boomers A then given part of the sale proceeds to their own kids as down payment. The kids buy Boomers B house and mortgage the rest of the purchase price. Boomers B pay off the HELOC loan. So now both sets of Boomers parents have sold their house and pocketed a nice sum. Their kids have also now transferred their future earning powers/wealth to their parents and banks by buying their parent’s house and taking out large mortgages. Inter-generation wealth transfer is complete and the boomers can happily go retire while claiming they did their kids a great favor by giving them a huge leg up in the property market via the down payment gift that they never got when they were young, and how young kids today just don’t know the meaning of hard work, scrimp and save, and etc, etc, etc.

Nothing saddens me more is parents feeling guilty for the unhappiness of their children. If they are willing to part with hundreds of thousands of dollars to placate this guilt, I hope this does not further the pangs of being inadequate both as parents and as a collective generation, simply because their children cannot afford home ownership at the peak of a speculative bubble.

Nice example, space889.
Notice what’s happened in space’s example: ‘wealth’ appears to have been generated for Boomer couples A & B ( (i) they’ve given money to their kids and (ii) they’ve ‘pocketed a nice sum’ on which they retire. ); but that ‘wealth’ is all based on debt (the (currently but not forever cheap) mortgages that the kids have promised to pay back).
Essentially a Ponzi that’ll have to hit the wall at some point. In this case the greater-fools end up being the Boomer’s own children, so how successful that “intergenerational wealth transfer” ends up being is yet to be decided.

Off topic — anyone recall when I pulled some information from Craigslist on Van rent prices and number of listings? Well, today the one bedroom section peaked at 1000 listings. That’s about 42 listings per hour!

Almost the entire bubble is simply the result of people at every link in the chain doing what they think is in their best interest: all the way from those deciding monetary policy down to buyers overextending.
It’d be nice to see such a truth being stated on the MSM, but they, of course, are simply playing their part in the chain (advertising; plus, how many who write the news invest in RE?).

Sky-high housing prices in Vancouver’s west side short-lived
FRANCES BULA
VANCOUVER— From Monday’s Globe and Mail
Published Sunday, May. 06, 2012 7:48PM EDT
Last updated Monday, May. 07, 2012 7:23PM EDT
34 comments
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Realtors say the small boom of sky-high prices for Vancouver west-side houses – one that provoked media around the world to claim with scant proof that mainland Chinese investors were buying up the city – is fizzling out.

Both sales and prices are down at the top end even more markedly than in the rest of the region, which has also seen a general slowdown this spring.

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A house on the 3000 block of West 24th Anenue, first listed at near $4.5-million six months ago, sold on April 15 for $3.35-million.

Fresh statistics from the Greater Vancouver Real Estate Board show the number of sales on the west side is down by nearly 40 per cent for the first four months of the year. Only a third of the nearly 400 homes listed in April have sold – one of the lowest rates in the region.

Realtors say the slowdown appears to have resulted from a combination of tighter lending practices by local banks, which now want proof of income to service large mortgages, more restrictions on how much capital can be taken out of China, and fewer immigrants.

“Banks are now requiring borrowers to disclose incomes and assets before mortgages are approved, as of the last six weeks,” said west-side realtor Marty Pospischil, who specializes in selling single-family homes owned by long-term residents. Last year, he says 90 per cent of his 100 house sales were to “offshore buyers” – people not living here yet, who flew in to buy. This year, it’s less than a tenth of that. “We’re now seeing a 50-per-cent collapse rate in deals, when it’s usually more like 5 per cent,” he said.

He and other realtors are saying the west-side slowdown is a good thing because the short-lived boom, which prompted local owners to start listing at increasingly inflated prices, was unrealistic and unhealthy.

“I always thought that market was not sustainable. Every local person was juiced out of the market. The average household income on the west side doesn’t support those prices,” said Andrew Hasman, who specializes in single-family homes on the west side.

Prominent condo marketer Bob Rennie said the high-end house prices in west-side Vancouver were so out of line with the rest of the region and country that it was skewing people’s perceptions of real-estate increases, not just in Metro Vancouver, but in all of Canada.

“In 2010, reports were saying real estate went up 8.9 per cent in Canada. But if you took out Vancouver, it only went up 4.3 per cent,” he said.

The spike in west-side house prices the last two years has provoked intense media coverage – with one Bloomberg News story in late May headlined, Chinese Spreading Wealth Make Vancouver Homes Pricier Than NYC – and debate among residents, politicians and commentators both here and abroad.

Much of it was attributed to “mainland Chinese” buyers, although no one had hard overall numbers to support that. Nor could anyone say whether that group might be 100 or 1,000 people, or whether they were truly offshore investors or immigrants.

But that didn’t stop arguments about the need to limit foreign ownership or to tax speculation to prevent the nebulous phenomenon.

A number of realtors said early signs started appearing six months ago that the market was slowing down, but the difference really appeared in early March. There is usually a surge of buying in Vancouver around Chinese New Year, as visitors from China come to see family or friends in the city and often make decisions to buy.

This year, the buying spree after Chinese New Year was much smaller, and house sales have slowed in March and April instead of the typical pattern of accelerating into spring.

Jean Zhang, with Sutton Group, said her clients, who tend to be immigrants looking to settle here permanently, are waiting longer to make offers.

“A few months ago, people were thinking, ‘I have to get in right away,’ ” she said. “Now, they see there are lots of choices. And they are giving lowball bids. They want to have good bargains in this market.”

Don’t forget Rennie is now a part of the B.C. Fiberals. The whole housing industry stinks like Louuu’s jockstrap. The damage has been done in terms of community feeling, urban landscape and loss of Vancouverites to other pastures. Many people I run into from B.C. here in Calgary have no desire to go back, even if prices drop substantially.

He throws out those affordability numbers like they are obvious, but I don’t see it. $66k gets you a $427k condo? If you put 10% down and amortize over 30 years, it’s still close to $2000 a month in payments, before condo fees and taxes. Plus you need to have managed to save up $42k on a $66k a year job. I make more than that and I would have trouble making those kinds of payments even at current interest rates. $2000 would be more than half a month’s take home for that person, that’s not affordable.

I think people who know best about the state of any RE market are not academicians, who rely on secondary data, but finance ministers, central bankers, bankers, RE boards, realtors, material suppliers, and builders.

Unfortunately, they are not going to be quite truthful. Finance ministers and central bankers do not oversee only RE but the whole economy. They don’t want to accidentally cause panic. The rest have HIGH STAKES in the business. They can’t say to you that hey! it is overpriced. The best they will tell you are that prices are now stable and this is a “balanced” market.

So the best for us is to live within our means. In case you really need to take risk, make sure you have something to fall back on when things go wrong. Gather as much data and info as possible and trust your own instinct.

I agree in part – I wouldn’t be surprised if somebody like Carney knows precisely what’s up; wouldn’t be surprised if he is privately just as bearish Vancouver RE as anybody here. But, as you say, he has a role to play and couldn’t share those ideas. Some of the bankers may see it, too.
As for the others, however.. the realtors, builders, etc… they are usually poor at predicting market direction… how many ‘get out’ near tops?… close to none. In fact, at tops, they are at their most eager. Pretty much the same as the general population.

I disagree. In fact both Carney and Flaherty are telling people to stop overextending themselves to buy real estate. They can’t raise rates so this is their only way of trying to keep a lid on prices. People are flocking to real estate because it is perceived as a safe investment compared to stocks and bonds.